U.S. Federal Communications Commission Local Telephone Competition: Status as of December 31, 2011 ii

Local Telephone Competition: Status as of December 31, 2011

Introduction. The Commission has used FCC Form 477 to collect subscribership information from providers of local telephone service – the incumbent local exchange carriers (ILECs), competitive local exchange carriers (CLECs), and mobile telephony providers – for more than a decade.1[7] The Commission has required interconnected Voice over Internet Protocol (“interconnected VoIP”) service providers to report subscribership information since December 2008 because the use of VoIP technology is growing rapidly and it increasingly is used to provide local telephone service.2[7]

This report summarizes the information collected about telephone services as of December 31, 2011. It demonstrates continued growth in subscribership to interconnected VoIP and mobile telephony services and continued decline in subscribership to traditional wired telephone services.3[7]

Retail local telephone service.

Retail local telephone service customers are served by two wireline technologies – “end-user” switched access lines and interconnected VoIP “subscriptions” – and by mobile wireless subscriptions.

• In December 2011, there were 107 million end-user switched access lines in service, 37 million
interconnected VoIP subscriptions, and 298 million mobile subscriptions in the United States, or 442 million retail local telephone service connections in total. See Figure 1.

1 See the Technical Notes and the Glossary that appear at the end of this report for more-detailed information about the Form 477 and the meaning of terms used in this report. For an overview of program history for the telephone services data, see Local Telephone Competition: Status as of December 31, 2008 (June 2010) at pp. 1-2, available at www.fcc.gov/wcb/iatd/comp.html[8]. Readers who are interested in historical trends in the data should note the changes in reporting requirements that were effective in 2008 and earlier, in 2005.
2 The FCC’s rules (at 47 C.F.R. § 9.3) state: An interconnected Voice over Internet Protocol (VoIP) service is a service that: (1) Enables real-time, two-way voice communications; (2) Requires a broadband connection from the user’s location; (3) Requires Internet protocol-compatible customer premises equipment (CPE); and (4) Permits users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network.
We note that the current interpretation of element (4) of the definition excludes the VoIP services that Skype offers in the United States, and subscribers to those services are not reported on Form 477. Prior to the December 2008 data, companies such as Vonage that solely provide interconnected VoIP service did not file Form 477. Telephone companies and cable companies that provided local exchange telephone service were required to file Form 477 but were not required to report interconnected VoIP subscriptions. However, some of these companies chose to include interconnected VoIP subscriptions in the number of retail (end-user) switched access lines that they reported.
3 The presentation of mobile wireless telephone subscriber counts in this report does not constitute, or imply, Commission analysis of the extent to which wireline and mobile wireless telephone services are demand substitutes or complements in general or in any particular situation. In the Form 477 program, commercial mobile radio service (CMRS) carriers who own or operate wireless networks report both their retail telephone service customers and the retail customers of mobile wireless telephone service resellers.
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 1• Over the three-year period presented in Figure 1, interconnected VoIP subscriptions increased at
a compound annual growth rate of 19.0%, mobile telephony subscriptions increased at a compound annual growth rate of 4.5%, and retail switched access lines declined at about 8.8% a year.4[7]

• Of the 144 million wireline retail local telephone service connections (including both switched
access lines and interconnected VoIP subscriptions) in December 2011, 83 million (or 58%) were residential connections and 61 million (or 42%) were business connections.5[9] See Figure 2.

4 The compound annual growth rate (CAGR) is a smoothed rate of growth calculated in three steps. First, divide the ending (Dec 2011) value by the beginning (Dec 2008) value. Second, raise the result of that division to a power equal to one divided by the number of years in the period (in this case, 3 years, so the power is 1/3). Third, subtract the number one from the result of the second step.
5 FCC Form 477 does not distinguish between residential and business subscribers to mobile telephony service. The information that Form 477 collects about mobile broadband service is summarized elsewhere; see Internet Access Services: Status as of December 31, 2011, available athttps://www.fcc.gov/wcb/iatd/comp.html[10]"> www.fcc.gov/wcb/iatd/comp.html[11].
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 2• Cross-classified by technology and customer type, the 144 million wireline retail local telephone
service connections in December 2011 were: 36% residential switched access lines, 38% business switched access lines, 22% residential interconnected VoIP subscriptions, and 4% business interconnected VoIP subscriptions. See Figure 2.

Figure 2

Wireline Retail Local Telephone Service Connections by Technology and

Customer Type as of December 31, 2011 (In Thousands)

Switched Access

Interconnected Total

Lines

VoIP

Residential

52,095
30,906
83,000

Business

54,772
5,753
60,525
Total
106,866
36,659
143,525
Figures may not add to totals due to rounding.

Switched,

VoIP, Business

Residential

4%36%

Switched,

Business

38%

VoIP,

Residential

22%

Service providers.

The Form 477 program – and this report – distinguishes ILEC operations from all other operations.

• Cross-classified by customer type (residential or business) and the service retailer’s regulatory
status (ILEC or non-ILEC), the 144 million wireline retail local telephone service connections in December 2011 were: 37% ILEC residential service, 26% ILEC business service, 21% non-ILEC residential service, and 16% non-ILEC business service. See Figure 3.

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 3

Figure 3

Wireline Retail Local Telephone Service Connections by Customer Type and

Regulatory Status as of December 31, 2011 (In Thousands)

Residential Business Total

ILEC

52,538
36,909
89,446

Non-ILEC

30,462
23,616
54,078
Total
83,000
60,525
143,525
Figures may not add to totals due to rounding.

ILEC
36,382
527
36,909
Non-ILEC
18,390
5,226
23,616
Business Total
54,772
5,753
60,525
Figures may not add to totals due to rounding.

Residential

ILEC, Switched

58.3%

ILEC, VoIP

Non-ILEC, VoIP

5.0%32.2%

Non-ILEC,

Switched

4.5%

Business

ILEC, Switched

60.1%

Non-ILEC, VoIP

8.6%

ILEC, VoIP

Non-ILEC,

0.9%

Switched

30.4%

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 5

Interconnected VoIP service.

Form 477 identifies three types of information about retail interconnected VoIP service.

• First, interconnected VoIP service retailers distinguish between the interconnected VoIP
subscriptions they sell to their broadband Internet access service customers (“broadband bundle” subscriptions, in this report) and all the other interconnected VoIP subscriptions that they sell (“standalone” subscriptions).

• Second, filers report whether or not interconnected VoIP subscriptions include, as a service
feature, the capability to use the service over any broadband connection to which the customer has access, for example, at a hotel or vacation residence (“nomadic” functionality).

Nomadic
637
3,129
3,766
Not nomadic
26,162
2,030
28,192
Non-ILEC Total
26,799
5,159
31,958
Figures may not add to totals due to rounding.

ILEC

Bundle, Not

nomadic

Standalone,

99.4%

Nomadic

0.1%

Bundle, Nomadic

Standalone, Not

0.5%nomadic<0.05%

Non-ILEC

Bundle, Not

nomadic81.9%

Standalone,

Nomadic

9.8%

Standalone, Not

Bundle, Nomadic

nomadic2.0%6.4%

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 7Form 477 collects the third type of information about retail interconnected VoIP service – the technology of the Internet access connection – for broadband bundles but not for standalone interconnected VoIP. See Figure 6.6[9]

6 Internet Access Services: Status as of December 31, 2011 discusses types of Internet access connections in greater detail. The report is available at www.fcc.gov/wcb/iatd/comp.html[8].
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 8

Switched access lines.

ILECs as a group predominantly deliver retail switched access lines over copper local loops. This appears also to be the case for those non-ILECs who report retail switched access lines. See Figure 7.

7 CLECs (as opposed to non-ILECs more generally) have certain regulatory rights to obtain ILEC local loops at cost-based UNE rates, which the CLEC may use to provide retail switched access lines or retail broadband Internet access connections. See C.F.R. § 51.307.

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 9switched access lines obtained at wholesale rates or reselling ILEC lines obtained under commercial agreements that replaced the UNE-Platform (“UNE-P”)), equipping leased ILEC special access circuits as switched access lines, and equipping local loops that the CLEC owns.

• CLECs reported using several methods to provide their 22 million retail switched access lines in
December 2011. They reported providing 38% of lines (or 8.4 million lines) by reselling ILEC wholesale or retail services. They reported providing 31% of lines (or 6.8 million lines) over ILEC facilities leased at regulated, cost-based rates (that is, as unbundled network elements, or UNEs). And they provided the remaining 31% of lines (or 6.9 million lines) over local loops that they owned. However, the information about wholesale relationships differs as reported by CLECs and by ILECs, as discussed in Figure 8.

1 Resold ILEC services include switched access lines made available to CLECs at wholesale rates, resold Centrex, Integrated Services Digital Network (ISDN), or other ILEC services, ILEC special access circuits channelized to provide CLEC retail switched access lines, and ILEC switched access lines provided to CLECs under commercial agreements that replaced UNE-P. (See note 2, below.) Filers are instructed to count the number of voice-grade channels the retail customer purchased, not the theoretical capacity of the circuit over which the service was delivered. ILECs generally do not know (and do not report) which ILEC leased special access circuits or other high-capacity circuits are being used to provide CLEC retail switched access lines (which the CLECs do report). 2 UNE-P was the combination of ILEC loop UNE, switching UNE, and transport UNE. The Commission directed CLECs to migrate their retail customers served by UNE-P to an alternative arrangement within 12 months of the effective data of the Triennial Review Remand Order, that is, by March 11, 2006. See C.F.R. § 51.319(d)(2)(ii). 3 ILECs report the number of UNE-L they provide to CLECs but do not convert any high-capacity UNE-L, such as DS1 UNE loops, into voice-grade equivalents. By contrast, CLECs report the number of switched access lines their retail customers purchase which the CLEC provisioned over UNE-L obtained from ILECs. Note, however, that a CLEC might use UNE-L only to provide broadband Internet access connections.

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 10

Remainder of the report.

The remainder of the report consists of tables and charts that update and expand data presented in earlier reports in this series. We present national data first, followed by state-specific data and, finally, summary statistics of service-provider presence in individual ZIP Codes.8[13]

* * * *
We invite users of this information to provide suggestions for improved analysis of data presented in this report by using the attached customer response form or by sending comments to IATDreports@fcc.gov[14]for subject: December 2011 local telephone data. We encourage users of this information to provide suggestions for improved data collection by participating in any formal proceedings undertaken by the Commission to solicit comments for improvement of FCC Form 477.

8 The appropriate interpretation of the ZIP Code-based information is discussed in the Technical Notes at the end of the report.
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 11

Presubscribed
55,835
18,079
73,914
Not Presubscribed
33,928
4,605
38,533
All Lines
89,763
22,684
112,447
Percent Presubscribed
62%
80%
66%
Some previously published data have been revised. Figures may not sum to totals due to rounding.
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 19

Table 9

Total End-User Switched Access Lines and VoIP Subscriptions by State as of December 31, 2011

48 %
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 31

Reporting Non-ILEC Interconnected VoIP Providers and CLECs

by 5-Digit Geographical ZIP Code as of December 31, 2011

Symbology

Number of Reporting Providers

Zero1 to 34 to 67 or moreZero Delivery Areas
A l a s k a
The data in this map represent the number of service providers
reporting they have at least one business or residential voice
customer in each ZIP Code, using either switched access or
interconnected VoIP (excluding ILEC connections).
Sources: FCC Form 477 and TomTom Multinet Post 2011.09.u30.
Prepared by the Federal Communications Commission,
Wireline Competition Bureau, Industry Analysis and Technology Division
P u e r t o R i c o
H a w a i i
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 32

Technical Notes

General

Detailed information about FCC Form 477 reporting requirements is available at www.fcc.gov/form477[15].

See Glossary for definitions of terms used in this report. Counting lines and subscribers

 Form 477 counts both switched access lines and interconnected VoIP subscriptions as the
maximum number of calls that may be active, simultaneously, from the end user’s location under the purchased service plan. All VoIP subscriptions discussed in this report are interconnected VoIP subscriptions.

 Form 477 data may not count all VoIP phone connections to Internet Protocol Private Branch
Exchange (IP PBX) equipment that is owned by business end users because of the variety of ways the IP PBX may connect to the public switched telephone network. Holding company-subsidiary relationships

 When counting service providers who have any retail customers in a particular geography (for
example, a state or a ZIP Code), we count a holding company or common-control entity no more than once in any specified sub-category of total providers.
 Nationwide counts of providers are unique counts for any specified sub-category of total
providers (for example, all non-ILECs or all interconnected VoIP providers); an entity operating in multiple states is counted only once. ILEC-CLEC affiliations

 Lines from CLECs who have ILEC affiliates are handled at the state level in one of several ways.
We place the lines into the non-ILEC category if the affiliate is an ILEC other than AT&T or Verizon. Lines from CLEC affiliates of AT&T and Verizon are allocated between the ILEC and non-ILEC categories based on staff estimates if the CLEC operates in the AT&T or Verizon ILEC service area in the state, respectively.

ZIP Code-based information

 Wireline service providers report whether they have at least one residential or business customer
in each ZIP Code, using either switched access or interconnected VoIP. This contrasts with the census tract-based broadband reporting requirements the Commission adopted in 2008.

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 33 The report includes summary statistics of the presence of competitors to the ILEC, or ILECs, in
individual ZIP Codes. These entities are CLECs or interconnected VoIP providers who are not affiliated with the ILEC, or ILECs, who serve end users in that ZIP Code. However, because providers may not offer service across an entire ZIP Code and because different providers may target different customer segments in areas where they provide service, we cannot conclude that the number of providers identified as delivering wireline service within a ZIP Code represents the number of options available to any specific customer within that ZIP Code. We further note that these data on the number of providers in a ZIP Code do not indicate whether a particular provider is offering service solely over its own last-mile facilities or is using the facilities of another carrier or entity.
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 34

Glossary

Term Definition

Broadband bundle
The purchase, from the same or affiliated retailers, of interconnected VoIP service and broadband Internet access service, either for a single price or for separate prices.
Cable modem service
A service which offers customers access to the Internet over a cable system at broadband speeds.
Circuit switching
A method of completing electronic communications in which a transmission path is established for dedicated use by a communication; the basis of the public switched telephone network (PSTN).
CLEC
Competitive Local Exchange Carrier: A new LEC that operates within the service area of an ILEC.
DSL
Digital Subscriber Line: A digital local loop, typically using copper facilities, that frequently is used to offer customers access to the Internet at broadband speeds.
End users
Residential, business, institutional, or government entities that use services for their own purposes and who do not resell such services to other entities.
Fixed wireless service
A radio communication service between specified fixed points.
FTTP or FTTH
Fiber to the Premises (Home): A network access architecture in which optical fiber is deployed all the way to the customer’s premises (home).
Internet access service
Service that provides end users access to the Internet.
ILEC
Incumbent Local Exchange Carrier: A company or cooperative that was providing telephone service in a localized area, typically on a monopoly basis, prior to enactment of the Telecommunications Act of 1996.
Internet protocol or IP
A language and set of formal rules that govern how packets transit the Internet.
Interconnected VoIP or
A service that enables real-time, two-way voice communications; requires
iVoIP
a broadband connection from the user’s location; requires Internet-protocol compatible customer premises equipment; and permits users generally to receive calls that originate on the public switched telephone network and to terminate calls to the public switched telephone network.
LEC
Local Exchange Carrier: A company that provides telephone service within a localized area and access services that connect its customers to long-distance (Interexchange Carrier) networks.
Local loop
The physical connection between the customer’s premises and the telephone company’s local switching office, typically provided using copper, fiber, or a combination of copper and fiber facilities.
Mobile wireless service
A radio communication service between mobile and fixed stations, or between mobile stations.
Nomadic interconnected
A service whose terms allow use over any broadband connection
VoIP
available to the subscriber (such as at a hotel or vacation residence); by contrast, a non-nomadic service subscription must be used over a single predetermined broadband connection.
U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 35Non-ILEC
Any provider of communications services who does not have ILEC regulatory status.
Other ILEC
An ILEC who is not an RBOC.
Other wireline
All copper-wire based transmission technologies other than DSL technologies; Ethernet over copper and T-1 are examples.
OTT
Over-the-top: Interconnected VoIP service provided by entities that neither own nor operate telecommunications facilities.
Packet switching
A method of completing electronic communications in which the information is disassembled into discrete packets that are transmitted independently and later reassembled; IP is an example.
PBX
Private Branch Exchange: A telephone switch that is owned or leased by the telephone company’s customer and generally located on the customer’s premises.
Retail local telephone
Retail switched access lines and interconnected VoIP subscriptions.
service
Retail switched access lines Switched access lines for which an end user is the customer.
Standalone interconnected
The purchase of interconnected VoIP service without the purchase of
VoIP
broadband Internet access service from the same retailer, or from an affiliated retailer.
Special access circuit
A dedicated, non-switched circuit (connection or line) provided by an ILEC, commonly used to connect an end user to another communications service provider; also frequently used by wireless service providers to connect cell towers to mobile switching centers (MSCs).
Switched access line
A service connection between an end user and the local telephone company’s switch; the basis of plain old telephone service (POTS).
Total ILEC lines
The sum of ILEC-reported retail switched access lines, interconnected VoIP subscriptions, wholesale switched access lines, and UNEs provided to CLECs.
UNE
Unbundled Network Element: A physical or functional element of an ILEC network that must be provided to a CLEC at a cost-based price, as provide for in the Telecommunications Act of 1996.
UNE-L
UNE-Loop: An ILEC unbundled local loop provided to a CLEC at a cost-base price.
UNE-P
UNE-Platform: The combination of ILEC unbundled local loop, switching, and transport, provided to a CLEC at cost-based prices.
Wholesale switched access
Local telephone service provided to an unaffiliated telephone company,
lines
which resells the service to end users; typically provided by an ILEC to a CLEC.
ZIP Code
A five-digit geographical ZIP Code.

U.S. Federal Communications Commission
Local Telephone Competition: Status as of December 31, 2011 36Customer Response Publication: Local Telephone Competition: Status as of December 31, 2011

You can help us provide the best possible information to the public by completing this form and returning it to the Industry Analysis and Technology Division of the FCC's Wireline Competition Bureau.

To discuss the information in this report, contact: 202-418-0940
or for users of TTY equipment, call 202-418-0484
Fax this response to
or
Mail this response to
202-418-0520
FCC/WCB/IATD, Mail Stop 1600 F
Washington, DC 20554

Document Outline

Note: We are currently transitioning our documents into web compatible formats for easier reading.
We have done our best to supply this content to you in a presentable form, but there may be some formatting issues while we improve the technology.
The original version of the document is available as a PDF[2], Word Document[1], or as plain text[3].